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Huawei CFO arrested in Canada, facing extradition to US

Meng Wanzhou, Huawei CFO, was arrested in Canada at the request of the US judiciary, with suspicions the company violated trade sanctions placed on Iran by the US.

The fallout between Huawei and the US authorities is reaching Shakespearean scale. On 1 December, Meng Wanzhou, Huawei’s CFO, vice-chair of the Board, and the daughter of the founder of the company, was arrested at the Vancouver airport while in transit to China. Several media outlets originally reported the arrest, though it has now been confirmed by Huawei.

“She is sought for extradition by the United States, and a bail hearing has been set for Friday,” Justice Department spokesman Ian McLeod said in a statement to the Canadian newspaper. “As there is a publication ban in effect, we cannot provide any further detail at this time. The ban was sought by Ms. Meng.”

Canadian law-enforcement source suggested the arrest was made at the request of the United States, which has alleged Huawei, and Ms. Meng, violated American embargo against Iran. A New York Times report quoted Senator Ben Sasse that the US Treasury and Commerce Department also asked the Justice Department to investigate Huawei for possibly violating the same sanctions.

Huawei denied the allegation in its statement to our sister publication Light Reading, claiming “Huawei complies with all applicable laws and regulations where it operates, including applicable export control and sanction laws and regulations of the UN, US and EU.”

Referring to the arrest of Ms. Meng, Huawei added that it “has been provided with very little information regarding the charges and is not aware of any wrongdoing by Ms. Meng. The company believes the Canadian and U.S. legal systems will ultimately reach a just conclusion.”

It has been reported that earlier in the year when ZTE was being investigated, documents seized the US prosecutors included Huawei’s files detailing the methods it used to insulate itself through third parties when trading with Iran, which ZTE meant to use as a blueprint but did not quite pull off. The investigators might have been following the lead.

The ZTE dealings with Iran eventually led to the firm being barred from using any US components or IP within its own supply chain, almost destroying the company itself. Logic would suggest the US would use a similar game plan here, though many suggest Huawei supply chain is not as reliant on the US as ZTE’s is.

The timing of the report was also interesting. The arrest took place on the same day as the American and Chinese presidents agreed on the 90-day truce to the trade war and a myriad of issues. For four days there was no mention of the arrest in any media or official channels, and the Chinese Embassy in Canada only lodged a complaint, much angrier than the Huawei statement, after the report came out. One can only speculate that efforts to scramble a deal behind the scenes must have failed.

The ultra-nationalistic Global Times went one step further with a call to arms:

China should be fully prepared for an escalation in the #tradewar with the US, as the US will not ease its stance on China, and the recent arrest of the senior executive of #Huawei is a vivid example: Mei Xinyu, an expert close to the Chinese Ministry of Commerce pic.twitter.com/W4fp8YNfmD

The latest episode of the wrangling between Huawei and the US certain will not help Huawei’s business prospect in the western markets, where it has been barred by a few prominent states. Nor will it provide any confidence in the prospect for a truce between the American and Chinese presidents. All Asian stock markets have fallen roughly 2% after the news broke.

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